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Suchart: Insurers' liquidity is healthy
WICHIT CHANTANUSORNSIRI CHAROEN KITTIKANYA
Finance Minister Suchart Thadathamrongvech yesterday played down reports that he had stated that the Thai insurance system was facing a liquidity crisis. ''I would like to insist that Thai insurance companies do not have any liquidity problems,'' he said on his first official day in office.
Online news sites had quoted Dr Suchart as suggesting that local banks had been contacted to provide liquidity lines to local insurers affected by the global financial crisis.
Dr Suchart yesterday denied stating that a liquidity crisis existed, but acknowledged that authorities, including insurance regulators and the Bank of Thailand, had discussed ''contingency measures'' in case local insurers or financial institutions were to face a shortage of cash.
''If there are any liquidity problems, then the Finance Ministry and the central bank must be ready to address the problem,'' he said.
Local insurance executives, already jittery due to the crisis of confidence that has swept the industry following the near collapse of American Insurance Group this month, bit their tongues about the statements made by the new finance minister.
''It's already a very difficult, sensitive situation. Certainly it doesn't help when policymakers come out and say something that could be misconstrued,'' said one industry executive, who asked not to be named.
According to the Office of the Insurance Commission (OIC), three insurers are currently under regulatory directives to improve their finances and capital funds: Finansa Life, Thanasin Insurance and Advance Insurance. The three companies have been monitored since well before the current crisis on Wall Street.
Finansa Life, a unit of the Finansa Group, raised its paid-up capital to 2.17 billion baht in June from 1.87 billion earlier this year.
Under the law, insurers must maintain capital funds, representing those assets in excess of their liabilities, of at least 50 million baht and 2% of their policy reserves. Insurers must establish policy reserves equal to the premium payments paid by their policyholders.
Chantra Purnariksha, the secretary-general of the OIC, told members of the House standing committee on banking and finance that only a ''handful'' of the 99 insurance firms in Thailand had financial troubles.
Mrs Chantra also insisted that the global financial crisis would have a negligible impact on the local insurance sector.
Sara Lamsam, the president of the Thai Life Assurance Association, reaffirmed that ''most life insurers'' were financially strong and in a solid position to cover their obligations.
''There may be some firms facing warnings from the regulators. It is public knowledge that can be seen from the OIC website. These companies are working to fix their problems,'' Mr Sara said.
''For life insurance firms, while some are facing shortfalls in their capital funds, their overall financial stability remains solid.''
Somphot Keitkraival, the deputy chief executive of ING Life, said he expected that Finansa Life would soon be able to address its financial issues.
''The issues have been widely known for several of years now. The capital fund shortfall is not a big deal,'' Mr Somphot said. ''We don't know the purpose and reason why [Dr Suchart] might have been talking about the status of the industry. But people are nervous, considering the chaos in the industry last week.''
In any case, Dr Suchart said he intended to maintain the current anti-inflation package established by his predecessor, Surapong Suebwonglee.
The package, which expires in January, offers free electricity and water for low-income households, excise tax cuts for fuel and free bus and train rides for commuters.
The Fiscal Policy Office has recommended terminating the 46-billion-baht programme as inflation fears have eased with the decline in global oil prices.
But Dr Suchart said oil prices remained volatile, and insisted that he would maintain the policy.
Discussing monetary policy, Dr Suchart said exchange rates of 34 to 35 baht to the US dollar were suitable for the Thai economy.
He said he favoured a weak-baht policy to benefit low-income residents.
Raising farm income was a priority, he said, which in turn would require that adequate liquidity was present in the markets and the exchange rate traded at a ''suitable level''.
''I acknowledge that there are contradictions in exchange-rate policies. A weak baht may help exporters, while investors favour a strong baht. We need to select one or the other,'' Dr Suchart said.
''My own thought is to look after the poor. I personally came from a poor family, and there are some 40 million people in the country who remain impoverished.''
Dr Suchart, 56 and trained in economics at Canada's McMaster University and the London School of Economics, served a short stint as deputy finance minister under the Samak Sundaravej government.
The former academic also had a high-profile clash over monetary policy earlier this year with the Bank of Thailand and its governor, Tarisa Watanagase.
Dr Suchart described moves to raise interest rates to curb inflation as misguided _ because higher prices were being driven by imported oil prices _ and argued that raising rates would only hurt economic growth.
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